Welcome
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hen my partner, Travis Burt, and I founded Transportation Impact in 2008, our central headquarters was located in the storage closet of a local surf shop here in Emerald Isle, N.C. And while the two of us spent countless hours envisioning which direction to take the company during the weeks, months and years that have followed, where we would go was never in question. Most of our staff has called Emerald Isle home for decades. The support from fellow citizens and our local and county governments is something we reflect on every day. Our community has been with us each step of the way, something we cherish and treasure. Understanding the role our town has played in helping us become one of America’s fastest-growing private businesses, we could think of no better way to show our gratitude than to further solidify our roots right here in our own beautiful back yard. Therefore, we could not be more pleased to announce construction of our new cor-
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porate office, which will be located about a mile from where it all began, right here on the Crystal Coast, along North Carolina’s Outer Banks. The early stages of construction are underway on what promises to be a landmark building our town and its residents can be proud of. We hope that it will serve as a reminder of what can be accomplished when good people come together and work toward a common cause. I am amazed by the talent and generosity that exists here in Eastern North Carolina, and the success our company has been fortunate enough to enjoy is a true testament to the dedication and diligence of so many, young and old. In about a year, our organization will move on to bigger and better things, but thankfully, with support from those around us, we will not have to move far. While the amenities of our new building promise to be an upgrade from our current location, the move will undoubtedly be bittersweet. Our organization, and the people in it, have made great sacrifices along the
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way. We have been together through good times and bad. We have been pushed and supported. We have laughed and cried. We have been challenged and have risen to the occasion. We are a family, inside our walls and out, testimony that the whole truly is greater than the sum of its parts. And when we close these doors, we will look forward to yet another milestone along what has been a wonderful ride. But we would be remiss if we were not a little saddened to think of the memories we have made within the place we will leave behind.
Keith Byrd Co-Founder, Principal Partner Transportation Impact kbyrd@transportationimpact.com
Contents 8-11 Keep Your Eye on the Prize Whirlwind changes to carrier cost formulas and service levels have made the shipping landscape increasingly dynamic and complex.
Q-Tip Discounting Minimums
4-5
6-7
Parcel Optimization
Partner Spotlight
Discover if claims consolidation is a viable option for your company.
Since 1966, PIP has insured packages for companies large and small, making the process painless at both ends.
Hidden within the fine print of your carrier agreement is language that defines minimum charges, which can have a substantial impact on how much you actually realize on certain service-level incentives. While it’s a simple concept – the carrier is basically saying you will never pay less than “x” amount, regardless of your incentive – it’s one that often catches shippers by surprise. In this quarter’s Q-Tip, we break down the significance of the minimum as it relates to making sure your next negotiation delivers the maximum impact to your bottom line.
12-13
14-15
Free Shipping
Discounting Minimums
The role of free shipping in parcel spend management.
Minimums can leave high-volume shippers with a minimal return on investment and a maximum headache.
QREVIEW is a quarterly newsletter published by Transportation Impact. All content in this publication is under international copyright laws. No part of the content can be reproduced in any form without the prior written permission of Transportation Impact.
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Supply Chain Solutions
Parcel Optimization Through Claims Consolidation
Obtaining an invoice for complex accounts can be akin to finding a needle in a haystack.
I
f part of your company’s internal parcel audit is contingent upon obtaining credits for lost packages, then you know how hard life can be. What seems like a simple, automated process is made difficult by call centers and red tape, in what basically is an exercise in providing the carrier with all the necessary information to correct its own mistake. To be fair, both major national carriers deliver with a staggering rate of efficiency. Better than 99 percent of your packages get
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where they are supposed to go by the time they are supposed to get there, regardless of which carrier you use. But less than 1 percent of billions of annual shipments is a sizable number, and finding a cost-effective method of securing the credits that belong to your company can be frustrating, if not impossible. The claims process can ultimately leave your business paying for packages that failed to meet their respective on-schedule delivery guarantees, then paying more, in terms of
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resources, to provide the carrier with the information necessary to compensate you for its error. Though the legal jargon contained within each carrier’s service guide is extensive, the process is relatively straightforward. Any time within nine months of the original shipment date, you can go to the carrier’s claims page, enter the tracking number, and follow the steps required to identify the vital characteristics of the lost package and thus initiate the claim.
Claims Consolidation Once upon a time, any claim filed up to the standard insurance amount of $100 was often paid to the shipper without much resistance – you realized the package was lost, you filed the claim, and the carrier owned up to the mistake and satisfied its obligation for failing to meet its guarantee to you, the customer. If you have filed any claims recently, however, you may have found that getting paid is no longer so simple. Providing either carrier with the documentation requirements outlined within its service guide can be a headache. For some businesses, particularly e-commerce retailers, obtaining an invoice for a particular shipment is a piece of cake. For other, more
complex accounts, it can be akin to finding a needle in a haystack, requiring phone calls, research and time . . . lots of time.
from the customer (who probably received a replacement), your claim will be closed and, in both cases, likely denied payment.
If you fall into the latter category, you could be killing your return on investment, considering that you are likely exhausting resources that will, at best, result in the recovery of $100 and the cost of shipping the package.
That leaves you with no hard-dollar credit in exchange for your effort, making the fight for a refund nothing more than a hassle that is not worth your time.
Once you provide the documentation you worked so hard to obtain, each carrier employs a third party to “trace” the shipment by searching its trace centers and possibly even contacting your customers.
What should be an exercise in recovering revenue ultimately results in further losses for your company, all to provide the carrier with the information you provided when you paid it to adequately deliver your package, a guarantee it subsequently failed to deliver upon.
If the carrier locates the package in question, whether in its lost and found center, or through acknowledged receipt
Therefore, a smart exercise for any high-volume shipper is to analyze data pertaining to lost and damaged shipments
within its supply chain. With that data in hand during your next small package rate negotiation, leverage the possible provision of quarterly refunds in lieu of filing claims for lost or damaged packages within your new contract based on the demonstrated history. Let’s face it – that makes the process easier on you and your carrier. Your customers expect you to uphold your guarantees. Why wouldn’t you demand the same?
Providing either carrier with the documentation requirements outlined within its service guide can be a headache.
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Partner Spotlight
PARCEL INSURANCE PLAN Underwritten by Fireman’s Fund (a company of Allianz), one of the nation’s largest and most financially secure insurance companies, PIP pays claims within seven to 10 business days. For more information on how Parcel Insurance Plan’s shipping insurance can cover your company’s packages, visit their website at pipinsure.com or contact 1-800-325-7390 or via email at office@pipinsure.com.
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Parcel Insurance Plan
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hen it comes to shipping merchandise, nothing stings worse than putting a package in the trusted hands of the carrier, only to have it ultimately turn up smashed, dinged, dented—or worse, never turn up at all. Well, maybe unless you insure hundreds, even thousands, of packages a year and nearly all of them survive their transits unscathed.
27 million packages
You would be hard-pressed to find a carrier that doesn’t deliver, literally and figuratively, on its commitments an overwhelming majority of the time. FedEx and UPS, the two largest parcel delivery companies in the world, move more than 27 million packages each day, and nearly all of them get there on time and in one piece. But mistakes happen. And when they do, they can be costly. Even if it’s ingrained in the way you do business, insurance is a gamble any way you look at it. If you pay for it, and your shipment arrives intact, you’ve increased your cost for nothing more than peace of mind. If you don’t, and the 55-inch HD television your customer ordered looks like an elephant mistook it for an ottoman by the time it lands on their doorstep, chances are that customer will not have a very good afternoon—and neither will you when you have to eat the cost and issue a replacement . . . fast. Therein lies the all too important factor in determining
whether the risk is worth the reward—cost. At the end of the year, how wide is the gap between what you paid for insurance and the amount you recouped for claims? If insuring packages helps you sleep at night, one glance at the aggregate cost of this expenditure, for example, can give you nightmares. Although the ultimate goal is customer satisfaction, it often comes with a steep price tag. So while it makes sense to protect your investments (both in your customer and in your merchandise) it begs the question: Why spend more than you have to on a service that, when it boils down to it, is pretty straightforward?
that typically is half what the carriers charge, or less. PIP understands that each carrier is a pro at delivering your packages and, over the years, PIP has established itself as an all-star at insuring them at the lowest cost. PIP passes the benefit of carrier reliability on to its customers, offering a cut-and-dried method of recouping funds when necessary, while eliminating the wasteful spending that so often accompanies paying for protection against uncommon but inevitable loss and damage claims.
For national carriers like FedEx and UPS, the only proof required to receive payment on a claim with PIP is the one-hundred-dollar liability amount that comes standard with every shipment. The process is similar with any regional carrier that offers a standard automatic liability. Even USPS shipments are insurable. What’s more, they’re all covered at a rate
Underwritten by Fireman’s Fund (a company of Allianz), one of the nation’s largest and most financially secure insurance companies, PIP pays claims within seven to 10 business days. For international shippers, there are no excluded or restricted countries, save Russia. To qualify, companies need only have insured packages over $100 in value on a daily basis or at least $1,000 in annual spend on declared value charges.
Easy billing
They make billing easy, too. So easy, in fact, that they don’t even send one. Instead, customers mail their payments in with a simple report, most often generated directly from PIP’s ERIN software or other third-party manifest system that outlines the insured shipments on a monthly basis.
One-page agreement
Parcel Insurance Plan (PIP) has been answering that question for nearly 50 years. Since 1966, PIP has insured packages for companies large and small, making the process painless at both ends. With a one-page agreement and a no-frills approach to claims processing, PIP partners with organizations intent on eliminating cost without sacrificing protection.
reports. Automated monthly reports from many third-party shipping manifest systems are also available.
pipinsure.com To further solidify its value proposition, PIP offers a unique set of proprietary reporting tools that can help companies take advantage of the tendencies underscored within their package insurance data. PIP’s ERIN 2000 software works in combination with UPS WorldShip® and FedEx Ship Manager®. This simple-to-install software is available at no additional cost and requires little more than a mouse-click to generate powerful, actionable
Cost is king in any business, but there is a fine line between cutting corners and anteing up for well-rounded coverage. PIP protects packages from every angle. From customer service to claims, processing to payments, PIP has perfected its core competency of small parcel insurance so that its customers can rest assured that they will receive the best possible coverage at the lowest possible rate.
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Parcel Focus
Keep your eye on the prize DEFINING YOUR DATA Small package shipping is one of the most hypercompetitive industries in the world. While parcel supply chain costs long have been a heavy overhead for many companies, whirlwind changes to carrier cost formulas and service levels have made the landscape increasingly dynamic and complex. Shippers have options aplenty – a good problem to have, some would say – but these catered services have literal and figurative costs that can weigh heavily on even the most sound business models.
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Defining Your Data
A
relatively obscure term 12 months ago, dimensional weight pricing, for instance, has found its way into many supply chain conversations around the world in less than a year’s time. DIM weight experts have appeared out of thin air with explanations of everything from how dimensional weights are calculated to “surefire” ways to keep costs down. The reality, though, is that there are no uniform solutions, no certifiably correct answers. Changes will occur. Whether it’s changes in price, product or consumer behavior, certain yet-to-be-determined factors exist that invariably will result in headaches within shipping circles in every industry. It is up to the individual company to address them accordingly. So how can anyone prepare for changes they do not know are coming? The answer is one part elementary, one part explicitly complex. The simple part is your company’s data. The hard part? Your company’s data.
A quality analysis that yields defined shipping volume and cost characteristics can lay a foundation for cost savings in the near term.
The level of investment a company makes in its own data integrity ultimately will dictate how easily that business adapts to a wide variety of changes, unforeseen or otherwise. The financial impacts of fledgling or thriving economies can be more accurately forecasted; business opportunities within emerging markets can be identified and capitalized;
shifts in consumer behavior can be measured and counteracted. Data can make the impossible seem less so, but only so far as the integrity and reliability of a company’s data will allow it. And the only thing holding it back is the company itself. The good news, though, is that data is not necessarily a resource
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Parcel Focus Every single cell within those weekly spreadsheets means something; all those seemingly inconsequential data points are there for a reason, even the blank ones. You do not have to know what you are looking for, only where you are trying to go. Yes, to ascertain the unbridled power contained within that melting pot of package data all you need to start with is a question about what you would like to know. The answer is in there. The hard part is finding it.
challenge. Sure, resources are necessary, but the same can be said for any initiative worth implementing. Instead, data is a planning challenge. It is about knowing what you want to accomplish, then painstakingly laying a foundation to build upon – from hygiene to user interaction to automation to harvest. The work is a front-end investment. Like any annuity or fine wine, the key ingredients are detail, persistence and patience.
you need to make intelligent business decisions?
S.M.A.R.T.
Think harder.
No matter how much data you have, the best place to start is from a single source of truth. Your weekly shipping invoices are your treasure trove. But if you have ever taken a look at a raw carrier invoice – more than 250 columns of aggregate numbers and text – you could hardly be blamed for staring blankly while scratching your head.
Any good data plan starts with an honest assessment of the current state of your company’s information. Is it S.M.A.R.T. (specific, measurable, actionable, reliable and time-bound)? Specific to your organization’s parcel supply chain, does the information you have at your disposal contain all of the information
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Each data point is like a breadcrumb: a small point that chronicles your journey toward the present – a historical demonstration of where you have been and the smallest hint about where you are headed.
Historical shipping data Your company’s historical shipping data is square one, the single most important place along the route to any and all sound business decisions. Who are your customers? What are your business’s strengths and weaknesses? Where should you invest? Where should you scale back?
The answers to these questions and countless more can all be found here, especially the burning question on everyone’s minds: How do I keep costs down? Look closer. A lot of insight into your customers’ buyer personas can be gleaned from the services you utilize to send goods their way. For example, residential shipments could tell you that your customers are ordering items for the home, travel, fashion, etc. It is not molecular biology, but it is a start. Keep looking.
Testing methods A significant portion of a carrier’s cost is in the last mile of a delivery. The farther their package cars have to wander, the higher the cost. If your customers are buying products for themselves or for their homes, could your marketing team develop a campaign that offers customers an incentive in exchange for having their products shipped to their work, and thus obtain a lower rate and eliminate residential surcharges?
Before any company can expect to lower costs, it has to know, in granular detail, the facets of its supply chains that drive that cost. transportationimpact.com
Defining Your Data Testing this or other similar methods on certain samples will provide comparative sample data against which you can base your company’s demonstrated data. Customer satisfaction could be surveyed to better understand whether customers enjoy the option of receiving items in their hands now more than finding them on their doorsteps when they return home. More satisfied customers, in a place where they can immediately pass along that satisfaction via word of mouth, has potential, especially if they come in a package deal with lower shipping costs.
Develop a method Before any company can expect to lower costs, it has to know, in granular detail, the facets of its supply chains that drive that cost. As outlined in the example above, understanding which service levels you utilize most is a fundamental starting point, and all of that information is housed within your weekly shipping invoice. In addition to service levels, there are the ever-popular accessorials that many packages incur en route to their final destinations: address corrections, additional handling, oversize charges . . . shippers know the routine. Like the rates themselves, these add-on charges are detailed for you each week. All you have to do is develop a method to track your historical trends and you will have visual evidence of which parts of your overall supply chain are most expensive.
Only then can you expect to effectively address cost in a sustainable fashion. The good news is that, so long as you are dedicating the resources on the front end, the output of data analysis can yield big returns to your bottom line in a lot less time than most people think. A quality analysis that yields defined shipping volume and cost characteristics can lay a foundation for cost savings in the near term.
Your interests How many times have you negotiated a carrier agreement and relied on your carrier rep to provide reporting that you need to accurately assess which services and surcharges are dictating your cost? Whether those requests have been born from lack of internal resources or a lack of overall knowledge of parcel
shipping’s many intricacies, that method relies on asking someone else to act solely in your best interest. Make no mistake, your carrier(s) are true partners through and through. Your best interests are certainly front and center in their minds; there is no doubt about it. They understand that your satisfaction must remain their focal point to ensure that your business is their business, and that it stays that way in the future. The reality, though, is that your interests often compete with those of another important group, the shareholders. Your carrier has a business to run, and profitability is important to them for the same reasons it is to you. Everyone is in business to make money. In that regard, your interests are competing ones, and it simply is not good business to rely on someone with a
How many times have you negotiated a carrier agreement and relied on your carrier rep to provide reporting?
competing financial interest to educate you on how to get the most out of your money. Therefore, analyzing your own data is non-negotiable in terms of truly acquiring a clear and universal understanding of every conceivable characteristic of your small package DNA. No one said it would be easy, but it is worth it. Look at the bright side.
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Shipping Strategy
or customers, the online shopping cart is a blessing. Its wheels never squeak; its handle is never subject to foreign, unidentifiable substances; and left unattended, it will not turn at random and gradually accelerate toward an inevitable collision with their passenger door. If customers change their minds, they can leave it right in the middle of the virtual aisle without thinking twice about it. But for e-commerce retailers in every industry, this inanimate object can, in many ways, be a curse. These days, if you sell something, you probably sell it online, a trend that is on an extraordinary rise and one that has parcel carriers making an extraordinary amount of money. That is because, if an item is sold online, it has to be shipped to the customer who bought it. Unlike the parcel shipping industry, competition in the e-commerce space is plentiful, making the common marketing tactic of incentivizing free shipping a key component in a company’s success.
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According to a 2012 Forrester study, nearly 60 percent of adults who shopped online in the U.S. gravitated toward retailers that offered free shipping. Twenty-seven percent added additional, unplanned items to their carts in order to meet free shipping thresholds. In 2011, 205 of the top 500 online retailers advertised holiday shipping promotions, presumably due to growing price considerations. “Retailers must offer and prominently display holiday shipping promotions or risk losing customers to competitors that will,” reported the study. The challenge, of course, is that as parcel rates continue to rise, companies find themselves stuck between a rock and a hard place. Whether they pass those higher costs on to their customers or eat the costs themselves, the impact on their profits is universally negative. So the same internet that makes finding lower prices possible for customers can wreak havoc on companies large, small, Big & Tall ,
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all working hard to identify ways in which their own costs can be cut. E-retailers in the apparel industry, for example, typically ship en masse to residential destinations. As such, there are several accessorial charges that can significantly impact the amount of money those companies spend with their carriers.
Free Shipping Costing thousands Left unattended, things like residential, delivery area and extended delivery area surcharges can cost companies thousands (or much, much more), and diminish the nest egg available to pass along enough savings to retain sales over the competition. This realization is leading decision makers in practically every industry to seek the help of third-party spend management firms to preserve their bottom lines. And while using these expert parcel consultants will not result in your carrier offering your company free shipping, indirectly they can help you ease the burden of offering free shipping to your customers.
Customer benefits “We always try to make money off of shipping,” said the spokesperson of a leading discount retailer. “It’s always been part of our business since the very beginning. That being said, we obviously like to give as many benefits to our customers as possible.” To do so, the company offers a free shipping break on its website. No matter what the customer purchases, if he or she reaches a certain spend threshold, the order is shipped at no cost to the shopper. If you have ever purchased an item online, there is a good chance you have encountered free shipping offers. The premise is usually pretty simple: spend a little with us, and we will reward you by sending you your order for free.
Somewhere on the other end of the line, however, the concept is often dense and complex. Business owners and company executives plug and pull numbers, manipulating them to fit within the finite boundary between sales revenue and profitability. Part of what lies in between are the costs related to getting your product into your customers’ hands, and back into yours in the event that the shoe, well, does not fit.
Negotiate your agreement This particular spokesperson said its company calculates its shipping expenses against revenue as a means of gauging success. The money it saved by hiring a third party to help negotiate its carrier agreement and audit its parcel invoices goes back toward its transportation expenses, bringing them down, and thus allowing the company to pass better savings along to its customers. But it is not always easy. “Basically, what we try to do is aim for a certain ROI when it comes to shipping profit,” the spokesperson said, adding that the more the company can keep its expenses down throughout its supply chain, the better discounts its customers can enjoy.
shipping to our customers. And trust me; it’s a big juggling act.” The process is easier for companies that ship smaller, more valuable products. A high-end clothier, for instance, might offer free international shipping since its orders might be worth hundreds of dollars. It is easier to overlook a $30 or $40 shipping charge when margins are high.
Grave consequences Of course, those margins vary by industry, and for most, failing to adequately manage shipping costs on the front end could have grave consequences. “That would be a huge impact for us. We aim for that certain [ROI] percentage. If we are paying the carrier twenty percent more, that means we are changing our shipping strategy altogether. We might have to raise our normal shipping rates, or the threshold in which a customer can receive free shipping. At the end of the day, that is going to lose us sales. It is always the lower, the better. “Being where we are, we have to make that money off of the shipping to stay in business.”
“Let’s say our ROI goal is ten percent, something like that. That would mean we probably want to spend ten thousand for every hundred thousand we make. Basically, the more we can keep those expenses down, the better off we are and the more we can offer free
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Q-Tip
Minimums Minimums lurk within the fine print of carrier pricing agreements and can leave high-volume shippers with a minimal return on investment and a maximum headache.
Discounting Minimums Can Have a Maximum Impact on Your Bottom Line
M
inimum. It’s one of the more mundane words in the English language. Quiet and unassuming, this run-of-the-mill term is largely overlooked. And if you have ever deeply
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delved into the doldrums of an extensive carrier small package agreement, chances are you might have breezed right by this nonchalant noun. This day and age, in business or otherwise, people are more
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concerned with minimum’s big brother, maximum. We want maximum benefits and maximum returns. We want everything maxed out except our credit cards. But if you want to maximize every dollar of your company’s operating budget, then you might want to start paying closer attention to the large role that minimums can play in padding your provider’s pockets. Minimums lurk within the fine print of carrier pricing agreements and can dissolve discounts in the blink of an eye, leaving high-volume shippers with a minimal return on investment and a maximum headache. Here’s how they work:
Discounting Minimums Let’s say your company is growing like a weed, and your carrier rep waltzes through your door with big news – he or she is there to deepen your discounts (and you don’t even have to ask!). Since your company has been such a great partner, they offer to bump that ground discount of yours from 30 percent to 35. In-house, management is spring cleaning its budget and here is your golden opportunity to step up to the plate and deliver. One- to 5-pound ground shipments are the cleanup hitters within your small package spend, so the 5 percent improvement sure does looks like a two-oh fastball. But before a good hitter swings for the fences, he carefully considers the circumstances, ever wary of the potential changeup.
Management is spring cleaning its budget and here is your golden opportunity to step up to the plate and deliver.
In sticking with the theme, maybe you ship baseballs – a lightweight, relatively clean box. Your average shipment is a zone 4, 5-pound package with a 2015 published rate of $9.65, meaning that 30 percent discount you had before your rep walked in would have netted you $6.75. There is only one problem. Remember that minimum? Well, ironically, the 2015 zone 2, 1-pound variety within the language of your carrier agreement carries a price tag of $6.61, which is the minimum charge for small package shipments under this agreement. So, while the gross impact of your initial 30 percent discount barely skirted it, your new, improved 35 percent
discount will not. In this example, you would receive just $0.14 of that additional discount before hitting the price floor – a far cry from the 5 percent that would have resulted in your paying $6.27, or $0.34 less per piece. That would make your company’s return for signing off on this hypothetical proposal as disappointing as an inning-ending double play. Of course, these numbers were pulled out of the sky, and the likelihood that your carrier could or would sneak this one under your nose is speculative. However, this situation is very real and is one that negatively impacts shippers on a regular basis. So how can you protect your bottom line? Counter by asking not only for a better discount on the service level, but also for a discounted minimum associated with that service level. Doing so will allow your company to realize the full discount it is currently receiving, which will lead to more savings down the stretch. How much you can get likely will depend on your overall parcel footprint, i.e., your spend and shipping behaviors. So while you might not hit a home run, you will save money. And that’s the name of the game.
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What did you do before your first cup of coffee?
Emailed $419 worth of automated address corrections to distribution center. Scheduled monthly email audit-savings report for parcel review meetings. Set up GL coding for web orders, service department and warehouse. Noted $1,284 in soft-dollar savings opportunities and customized dashboard with Air-to-Ground report.
Schedule a 20-minute Parcel Intelligence Dashboard demo and learn how you can optimize your shipping spend and capture all your FedEx and UPS refunds. transportationimpact.com // info@transportationimpact.com // 252.764.2885